Q: What would you have done differently than Comptroller Holtzman to address the city's budget problems?

A: As a comptroller you to face up to the reality of the situation. Today, we have exactly the same situation as when I was deputy mayor in 1978. When Koch and I came in, we were faced with a huge budget crisis. We called in all the commissioners, and we made massive, unpleasant, and unpopular cuts. But we did it right away.

If I were the comptroller, I would have insisted that unpleasant and unfortunate cuts be made immediately. I would never have approved the unrealistic sale of [Off Track Betting] for $55 million. There's no chance that we're going to get additional money from Washington because I doubt that Clinton will be able to get himself straightened out. And the idea of factoring the tax receipts [the $215 million sale of property tax receivables proposed in the city's fiscal 1994 budget] is exactly what got the city into trouble in the 70s.

Q: But hasn't Holtzman criticized the budget, including the sale of tax receivables?

A: The problem is, she's not saying these things consistently. If you go back and read her State of the City speech in January, she was very optimistic. She's not really dumping on Dinkins. She's not testifying at the City Council. She's not holding press conferences, she's not criticizing. You know she does a mild criticism, but basically she went to S&P begging them not to downgrade the city. I would be begging them or insisting that they do downgrade the city.

Q: Why?

A: Because the budget is unbalanced. See, on the one hand, if she really believes that the budget is unbalanced, then how does she justify going to Standard & Poor's to argue the budget is balanced. These are totally inconsistent positions. The problem is that she does not want to antagonize Dinkins, and the main reason for that is that the polls indicate her strongest base of her support is among blacks. I don't see how she establishes credibility when she plays that game.

Q: So, you would go to Standard & Poor's and ask for a downgrade, a move that could ultimately cost the city millions of dollars extra to sell bonds?

A: No. What I would say to them, and what I said publicly to the press, is that this budget is not balanced. You can't go and have a press conference and complain about the budget being unbalanced and then go to Standard & Poor's and say 'don't downgrade us.'

Q: You have criticized the city's proposal to generate about $215 million through the sale of delinquent tax receivables. Everybody in City Hall says it's a prudent way to drum up revenues.

A: It's the same as selling tax anticipation notes. You sell notes in anticipation of collecting taxes. In this case, the city wants to sell its unpaid taxes, so it's a tax anticipation collection. If they would label it as a tax anticipation note sale, you would recognize that this is exactly what was prohibited after the financial crisis of the late 70s.

Q: Do you think the Financial Control Board, which includes some allies of the mayor such as Gov. Mario M. Cuomo and state Comptroller H. Carl McCall, will criticize the city's fiscal 1994 budget at its meeting today.

A: Already, the three private members have said they think the budget is unbalanced. All you need is one more, and ironically it could be McCall. If Carl McCall decides that he's going to be an independent comptroller, he could join with the three private members and give a majority of four, and that might be enough to even force Cuomo to go along with making the adjustments to the city's budget that I've been talking about.

Q: But does the control board have the authority to take unilateral action on the city's budget?

A: They can say we, The Financial Control Board, feel the budget is unbalanced, and you have to make these adjustments.

Q: But at this point in the budget process, the FCB can't take over the city's fiscal matters, correct?

A: Well, they can take over if two things happen. One, if the bond rating agencies downgrade, which they haven't done, or two, if the budget is $100 million or more out of balance. They can also say that [the budget] is just pie in the sky, such as the idea of getting more money from Washington and Albany and the sale of OTB, which nobody will buy.

Q: If the budget is in such bad shape, why do you think the current administration has waited so long to act?

A: Because it takes someone who has a different view. Unfortunately, you don't have any people with an historical perspective of what made New York City, and with a conscious reality of what America is about in 1993.

Again, Holtzman and Dinkins keep talking about help from Washington. They say Reagan and Bush are to blame. Well, where the hell was Jimmy Carter? He was the one who walked away from us in the South Bronx.

Does anyone believe that Bill and Hillary Clinton are going to come in and help us to rebuild the South Bronx or Harlem? Of course not. So it's the failure to come to grips with reality, and to say, let's pull ourselves up by our own bootstraps, which is something we can do.

Q: What is the fiscal reality of New York City today?

A: The problems is we have to recognize that the economy of the city no longer permits the city to continue to provide this massive array of services, which no other city could do and some states cannot do. We are now at the point where we can no longer increase taxes because if we increase taxes, we lose more businesses and more middle class people.

So you cannot continue like Dinkins and Holtzman, hoping that the city is going to get federal or state aid. It is not going to happen.

Q: So as comptroller, you would call for reduction in some taxes?

A: Yes, I would cut taxes, but in order to do that, you have to eliminate some of the functions that we are now carrying out that we should no longer be carrying out.

For example, I would eliminate the Health and Hospitals Corp. [Also,] the Health Department, the Mental Health Department because the state already has a health department and a mental health department. That would save you hundreds of millions of dollars which you can use to eliminate the unincorporated business tax, the commercial rent tax, and begin to cut back on the real property tax.

In addition, I would move to transfer the Corrections Department to the state and the Parole Board because most of the prisoners on Rikers Island and other places are state prisoners. The state gives us $34 a day, but it costs us $162 a day.

Q: Why do you think the mayor has not pressed for these changes?

A: That's not his style. He doesn't have any passion about changing things that need to be changed. I supported him for mayor in 1989. The reason I'm not supporting him now is because as I said, he could speak with the same passion that I do about the changes that need to be made, but he's indifferent to it. He does not get involved in these tough decisions, and Liz Holtzman certainly doesn't because that's not her concern. See, my career is based upon trying to solve the urban crisis, and to me that's the most important domestic problem in America.

Q: Holtzman has come under pressure for her bond underwriting appointments and her methods of raising money from underwriters, such as asking firms that are competing for underwriting business for specific sums of money. How would you do things differently?

A: [Attorney General] Bobby Abrams had the same problem. [Former City Comptroller Harrison J.] Golding did also. The idea of asking for specific amounts of money is something I don't believe in doing. You can ask people to help out the best they can, but to say to someone, $25 grand or $50 grand, or so much for breakfast, or so much for lunch, or so much for dinner, that is something I would not support.

Q: One of your Democratic opponents Alan Hevesi, has called for competitive bidding for most city bonds sales. Where do you stand on that issue?

A: I think for smaller issues, the plain-vanilla bonds, we could do competitive bidding. But when I was chairman of the [state mortgage agency], I found that for larger issues, negotiated bidding was useful and helped save money. As comptroller, I would rotate firms that underwrite city debt, so that nobody can say that they're in the city's pocket.

Q: At the moment, Holtzman is leading by a wide margin in the polls. However, many key Democrats are lining up against her. Why do you think so many people in party leadership positions do not like Holtzman?

A: Well she antagonizes people tremendously. She antagonized the women by dumping on Geraldine Ferraro last year when she knew that she should have spent her money trying to [help Ferraro] stay ahead of Al Sharpton [in the Democratic primary for New York's U.S. Senate seat], and I say this as someone who supported her ... So she hurt Geraldine, and [Sen. Alfonse] D'Amato was re-elected. People remember those things.

Q: People are saying you run is vindictive, because of your disagreements with Dinkins.

A: I'm not running against him. I'm running for comptroller.

Q: But you're bringing up issues that question the mayor's competence.

I supported him in '89 because I thought he would be tough enough to take action on the things that need action. But he hasn't. He vacillates and doesn't speak out forcefully. He doesn't hold up standards, and neither does Liz. So you have a drifting administration.

Q: AND A:

Herman Badillo's decision to run for New York City comptroller on a "fusion ticket" with Republican-Liberal mayoral candidate Rudolph Giuliani did not sit well with his former allies in the city's Democratic Party establishment.

Badillo, after all, was elected Bronx borough president in 1965 as a Democrat. In the early 1970s, Badillo served as the first Puerto Rico-born Congressman, also as a Democrat. In 1978, he was appointed deputy mayor by the city's three-term Democratic mayor, Edward I. Koch.

But Badillo has never been afraid to buck the establishment, even if it means alienating friends, like Koch. Badillo was dismissed as deputy mayor because, in Koch's eyes, Badillo wasn't a team player. While a member of Congress, Badillo admits that he could not convince fellow lawmakers to address problems that afflict his home district in the Bronx.

Most recently, Badillo attempted to run against David N. Dinkins for city mayor, pushing a neo-conservative agenda of less government, lower taxes, and family values on the Democratic Party. After fund-raising difficulties, Badillo dropped out of the mayoral race to run for city comptrollers as both a Republican and a Democrat, using the same message to attack Dinkins and City Comptroller Elizabeth Holtzman.

In an interview with reporter Charles Gasparino, Badillo, a partner at the law firm of Fischbein Badillo Wagner Itzler, offers a prescription for the city's social and economic woes, and bashes Dinkins and Holtzman for making a bad situation even worse.

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